Child care voucher scheme

Child care voucher scheme

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I have clients (husband & wife) who have 2 separate limited companies who want to set up a childcare voucher scheme for each of their companies so that they can pay the nursery for their child.

Has anyone set up such a scheme? If so is there anywhere I can go to source the documentation to run the scheme?

What are the potential pitfalls?

Thank you in advance for your comments.

Simon Lever

Simon Lever

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By User deleted
24th Oct 2006 10:50

What scheme only charges 1%?
We pay Accor to do ours via their internet scheme and they charge 7%. Even though we don't have many on it, it is worth it to us to avoid the hassle of doing it ourselves.

As for how easy it is to set up, it really is very easy. As the previous respondant said, it really depends whether you wish to do a salary sacrifice scheme, in which case you do have to jump through a few hoops. In the case of your clients I would imagine they would do it in addition to their salary as it is their own company in which case it can be as simple as stating in their contract that they now earn £x and have £x as childcare provision as their package. The company can then pay the nursery direct, vouchers don't have to be involved as long as the money is separated and kept for that single purpose and can be proved as such. You would want the employee to sign a paper confirming the age and name of child for which the provision would be used and that the child is their legal responsibility.

Don't forget that is you offer such a scheme, in order to meet the tax and NI free limits of £243 per month, it has to be available to all employees, so they can't just pick it for themselves.

The three potential pitfalls are
1) the risk of a salary sacrifice scheme taking an employee below the national insurance thresholds, thereby risking losing the right to some benefits;
2) tax credits may be affected as a salary sacrifice scheme will lower earnings but also lower eligible childcare costs by the same amount (this often is positive ibut should be checked out before signing up)
3) the childcare vouchers/provision element of the package does not count towards SMP/SAP etc so results in a lower SMP etc payment BUT does count as a non-cash benefit so must be paid in full during the maternity leave period so could prove more costly for an employer who only pays SMP and not an enhanced package.

Hope the above helps, it is simple and straightforward in reality and in most cases well worth doing.

Colette

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By User deleted
23rd Oct 2006 18:19

Piece of cake
It really is very easy. The Revenue explain what the vouchers must contain. Knock them up on a word processor, and then explain to the nursery you are paying with a voucher which will be redeemed immediately by a cheque. Hand the nursery the voucher, ask for it back, give them the cheque! Why shouldn't they agree, yet still complies. Note on the voucher when redeemed and keep with wages records.

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By User deleted
23rd Oct 2006 20:35

The following link should help:
http://www.hmrc.gov.uk/helpsheets/e18.pdf

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